The real estate housing market update for 2023 started off with uncertainty and with the hope of interest rates dropping. Unfortunately, interest rates have only increased with the average 30-year fixed rate mortgage at 7.12% for August.
Let’s take a look at where we were in 2022 in Essex County Massachusetts.
2022 showed Massachusetts having a median home price of $655,000 with 1980 units sold in a 6-month period. The average days to offer was 13 days and homes were selling at 107% of asking.
In the same time period in 2023, the average home price was $680,000 up 3.7% with 1980 single family homes sold. The average days to offer rising slightly to 19 and homes sold for 104% of the asking price.
In 2021, the number of days it took to get an offer on a home was 22 whereas in 2020 it took an average of 34 days.
Currently, there are 489 single-family homes on the market versus 535 homes on the same day in 2020.
Now, in contrast to 2018 on the same day in August, which was a more balanced market, there were 1271 homes for sale.
2021 was a very hot seller’s market. Meaning, the market heavily favored sellers over homebuyers.
But as we continue into 2023, we have seen a few converging forces leave uncertainty in the market moving forward for the rest of the year and into 2024.
What Is Driving The Local Housing Market 2023?
Of course, no one has a crystal ball and can predict the future of the housing market for Massachusetts, 2024. But much of what has driven the past market is still in effect today.
Housing Shortage
Nationally, we are seeing a housing shortage. The country is about 5 million housing units shy of adequately housing our nation’s population.
The shortfall is for several reasons. Builders can not keep up with the demand. Much can be blamed on restrictive zoning and recent supply chain issues.
As house prices increase, so do rental prices. Many renters find that they can buy a home with a mortgage payment roughly the same as their monthly rent. It makes financial sense to buy for many ready to purchase their first home.
It boils down to supply and demand. Currently, the demand is far greater than the supply, which will continue to drive up prices and create heavy buyer competition.
Interest Rates Were Extremely Low But Have Taken A Sharp Upturn
Interest rates were extremely low for 2021 and the beginning of 2021 has seen interest rates hovering around the low 3% or high 2% range.
In March of 2022 we have seen interest rate hikes that have more than double the unprecedentedly low rates of 2021. In 2023 we have continued to see them rise to over 7%.
Cost of Construction High
The high cost of construction plays into the cost of real estate overall.
The National Home Builders Association cites construction cost are up over 33% in one year.
That as list prices on new homes rise, due to the rising construction costs, it makes similar resale homes more valuable as a substitution. Along with the rising cost of construction, that same resale home would cost more to build, dragging up the value.
Housing Forecast Moving Forward- Last Half of 2023
Since the beginning of 2022, several factors converged all at once and have remained in place, that will alter the remaining course of the 2023 housing market.
Drastic Rise In Interest Rates
Since the beginning of the year, interest rates have almost remained at 6.5 percent or higher.
This translates into the buying power of the buyers in the marketplace. A $550,000 buyer at the start of 2022 to maintain the same mortgage payment they were previously pre-approved for can now only afford $345,000.
Many home buyers don’t have much wiggle room to put down more money or raise their pre-approval amount.
Seller Refusing To Give Up Their Low Interest Rates
Significant Inflation
Buyers only have so much money every month. And like everyone, they are feeling the pinch at the gas pumps, the grocery store, and beyond.
There is only so much money buyers have to put towards a home mortgage every month. Rising interest rates and increased living expenses will put a damper on what a buyer can afford moving forward into 2022.
Prediction for 2023 Massachusetts Real Estate Market
Remember, real estate markets are local. I am discussing Essex County. Reasonably you can expect much of the same in the greater Boston area inside the 495 belt and slightly beyond, Consult your local REALTOR to see what is happening in your area.
Appreciation is slowing to a normal pace, market times are up slightly and asking to list price is dropping. These show the market has cooled slightly.
But typically that would mean inventory would climb. Yet, it’s not. As inventory dries up it will keep the market hot.
Much of the same will continue until the end of the year. Inventory will dry up and I don’t believe we will see interest rates drop significantly if at all. I am anticipating another Fed Rate hike in September.
The underlying factor still driving the real estate market is a rising lack of housing inventory and rising construction costs. While rents continue to rise and housing remains in a shortage, we will not see a bubble burst. Waiting on the side lines for the housing bubble to burst is not the way to go.
Massachusetts Home Sellers
2023 will still be a great time to sell a home in Massachusetts. But expectations should be different for home sellers. Cautiously optimistic is the way to go.
Don’t expect to be entirely in the driver’s seat and demand everything you want. Prepare your homes and work with buyers.
As a home seller, your home will still sell quickly and there will still be plenty of buyers. And you can still expect multiple offers on your home going slightly over asking.
Massachusetts Home Buyers
Homebuyers can still expect some chaos to continue, though it should lighten up a bit. There will still be limited inventory, but the competition among buyers will lessen.
Should I Consider Buying A Home or Wait?
As a buyer, you may be left with the thought of whether I should buy a home or wait.
The answer to that is highly personal.
But, if you need a home, you need a home. Are you going to continue paying your landlord’s rent with an exorbitant monthly rental rate? Throwing away rent money every month?
If you buy real estate as a primary residence for the intermediate to long term, you probably won’t be disappointed. Even buyers who bought in 2007 the peak of the last housing bubble have seen their homes appreciate 60% in the past 15 years.
Yes, if you bought in 2007 at the peak, you probably didn’t break even until owning your home for 6 or 7 years. But as you start owning for the intermediate or long term, it is a beneficial purchase.
Never mind, the principal that has been paid down over those years. Buying a home is not strictly about money. If you think about real estate in terms of 7+ years you will be able to weather most storms in the real estate market.
Massachusetts Housing Forecast Beyond 2023
Year over year appreciation will slow to a more modest pace of 2 to 4% a year.
The housing shortage and the cost to build will keep the housing market from any serious dip in prices.
Instead we will see a moderate sellers market as inventory dries up.
Summary of T Real Estate Market 2022
If I had to predict the future state of the real estate market in 2023 for Massachusetts, I would say we are still going to see much of the same with The negative factors in play are mitigated by other forces like a housing shortage and high cost of construction.
Things will calm down slightly in certain market segments, but if you are buying around the median house price or under, things will stay pretty heated. There are more buyers than there are houses available. Supply and demand.
Other Real Estate Resources
- Check out Paul Sian’s real estate round up for December 2021. Find the best articles on homeownership, home buying and home selling.
- While it may be tempting to do work on your home without a building permit…. don’t!! Vicki Moore explains everything you need to know about building permits.
- At this point, everyone knows it is a seller’s market and most sellers can expect multiple offers. Given sellers are in the driver’s seats, Scott Russell has expounded on some terms sellers should negotiate when there are multiple offers.
The 2023 Real Estate Market- What Should You Expect? is provided by Kevin Vitali of EXIT Realty. If you would like to sell or buy a home, give me a call at 978-360-0422 and let’s get the process started.
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